We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

Singapore High Court declines to set aside arbitration award on grounds of breach of natural justice

In ADG & Anor v AD/ and another matter, the Singapore High Court considered an application to set aside an arbitration award on the basis that there had been a breach of natural justice, and that the applicant had not been given an opportunity to present his case. The court dismissed the application. In particular, it held that the arbitral tribunal had not breached any rules of natural justice in refusing to re-open the proceedings to admit further evidence, and that all decisions made by the arbitral tribunal were proper case management decisions.

Facts

The first plaintiff secured the rights to survey for a natural resource ("Resource X") in certain geographical regions in Country A under three contracts (the "SurveyAgreements"). The first plaintiff then entered into a separate agreement (the "Option") with the defendant in 2009. Under the Option, the defendant agreed to fund the first plaintiff's surveys under the Survey Agreements in exchange for an option to purchase a percentage of the first plaintiff's rights under any given Survey Agreement. In the Option, the first plaintiff made certain threshold and continuing representations and warranties to the defendant concerning the status of the first plaintiff's rights under the Survey Agreements. The second plaintiff executed a guarantee in favour of the defendant, guaranteeing the first plaintiff's liabilities to the defendant up to a certain maximum (the "guarantee").

The defendant asserted that it had a right to terminate the Option. The first plaintiff denied any such right and alleged the defendant to be in breach of the Option and duly served a notice of default. The defendant in response sought to exercise its right to terminate the Option and called on the second plaintiff to guarantee the first plaintiff's liabilities. The defendant also commenced arbitration, seeking to validate the defendant's termination of the Option and to recover damages against the first plaintiff and payment under the guarantee.

Arbitral tribunal award

The arbitral tribunal (the "Tribunal") found in favour of the defendant and dismissed the plaintiffs' counterclaims. It held that the defendant had validly terminated the Option, and that by reason of this termination, the first plaintiff was liable to repay the defendant the entire sum which the defendant had paid plus interest. In addition, the second plaintiff was liable as guarantor to pay the defendant the maximum guaranteed sums.

The plaintiffs applied to the High Court to set aside the arbitral award on the following grounds:

That they were unable to present their case within the meaning of Article 34(2)(a)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case); and

Alternatively, that their rights were prejudiced by a breach of the rules of natural justice in connection with the making of the award within the meaning of section 24(b) of the International Arbitration Act (the making of the award was induced or affected by fraud or corruption).

The plaintiffs relied on the fact that the Tribunal had declared the proceedings closed on 4 June 2013, and subsequently dismissed the plaintiffs' application to reopen proceedings on 9 June 2013. As a result, the plaintiffs claimed that they had no opportunity to put before the Tribunal allegedly relevant evidence upon which they wished to rely, and which they expected to become available on or before 8 July 2013. By way of background, the Tribunal had dismissed the plaintiffs' application to reopen the proceedings on the basis that the potential evidence sought to be adduced was vague, and the time frame when this evidence would come to light was uncertain. It was undisputed that some additional evidence did in fact materialise after the Tribunal declared the proceedings closed. It was also undisputed that the Tribunal did not have an opportunity to take into consideration this additional evidence in arriving at its determination of the parties' disputes.

In response, the defendant maintained that no grounds to set aside the award had been established. In particular, the defendant argued that there was no breach of the plaintiffs' right to be heard, and that in any event, there was no prejudice to the plaintiffs because the new evidence would have had no impact on the Tribunal's decision. Thus, the plaintiffs' applications were nothing more than a contrived attempt to re-litigate the disputes in the arbitration and to delay enforcement of the award.

The plaintiffs relied on their right to be heard to support their submission that there was a breach of the rules of natural justice within the meaning of section 24(b) of the International Arbitration Act, and to support their argument that they were unable to present their case within the meaning of Article 34(2)(a)(ii) of the Model Law.

The court disagreed that the Tribunal had acted inappropriately in: (i) closing the proceedings and (ii) then refusing to reopen the same. In this regard, the High Court noted that these were quintessential case management decisions - such decisions, as well as the procedure followed in arriving at these decisions, were well within the Tribunal's wide and flexible procedural powers.

The court found that the Tribunal did not act unilaterally, unfairly or unreasonably in declaring proceedings closed. It noted that the Tribunal followed the rules of the Singapore International Arbitration Centre in informing the parties of its proposed course of action and providing three business days for comment. The court found this to be a perfectly reasonable deadline. It was also the court's finding that the Tribunal did not act unilaterally, unfairly or unreasonably in refusing to reopen proceedings as it had set previous reasonable deadlines for such requests to which the plaintiffs did not adhere. Further, having been made aware of the "potential developments", the Tribunal was entitled to take the view that it remained satisfied that the plaintiffs had no further or material evidence to produce.

Having overseen the entire proceedings from beginning to end, the Tribunal was well placed to make the case management decision that the anticipated development lacked sufficient certainty and specificity to justify re-opening the proceedings and that the prejudice to the defendant in further delaying the proceedings outweighed any prejudice that the plaintiffs might suffer.

The court held that the Tribunal's overall conduct showed regard for the rules of natural justice and its obligation to be fair to both parties. The plaintiffs had failed to establish that there was a breach of their right to be heard.

For the sake of completeness, the court went on to consider the effect on the arbitral award, if any, of the "potential developments" evidence not being presented to the Tribunal. The court was of the view that the decision on the central issues was not causally connected to the "potential developments" evidence. The court found that this new evidence carried no real chance of making a difference to the final outcome of the arbitral proceedings in any meaningful way.

For the above reasons, the High Court dismissed the plaintiffs' application.